Using CAPM

(LO1,4)

A stock has a beta of 1.14 and an expected return of

10.5%

. A risk-free asset currently earns

2.4%

.\ a. What is the expected return on a portfolio that is equally invested in the two assets?\ b. If a portfolio of the two assets has a beta of . 92 , what are the portfolio weights?\ c. If a portfolio of the two assets has an expected return of

9%

, what is its beta?\ d. If a portfolio of the two assets has a beta of 2.28 , what are the portfolio weights? How do you interpret the weights for the two assets in this case? Explain.

17. Using CAPM (LO1,4) A stock has a beta of 1.14 and an expected return of 10.5%. A risk-free asset currently earns 2.4%. a. What is the expected return on a portfolio that is equally invested in the two assets? b. If a portfolio of the two assets has a beta of . 92 , what are the portfolio weights? c. If a portfolio of the two assets has an expected return of 9%, what is its beta? d. If a portfolio of the two assets has a beta of 2.28 , what are the portfolio weights? How do you interpret the weights for the two assets in this case? Explain